The IT Consultant's Guide to Hiring and Managing Subcontractors

If you are building a consulting company, at some point you may need to hire subcontractors for overflow work or who have skills you do not possess. Managing them, tracking their time, and communicating with them are critical skills needed to maximize their effectiveness. Here is guidance to help you hire and manage subcontractors for your consulting business.

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As you grow your consulting business, you may find that you add more clients or win more projects that you can adequately handle on your own. Or you may find that opportunities arise that involve skills that you do not possess.

At these times, you must consider whether you hire the talent necessary to complete the project or let the opportunities go. There is no right or wrong answer here.

I know a number of independent consultants who have no interest in taking on employees or contractors. They turn projects down if their workload is too great and turn over projects to others that involve a different skillset.

However, if you want to take on more projects and those projects involving skills you do not directly possess, you need to hire or contract that talent.

Hire Versus Contract

The first question you want to ask is whether you are ready to, or want to, hire an employee versus hire a contractor.

Typically, employees involve a greater commitment and legal/tax requirements. You are responsible for their work environment, a portion of their federal and possible state taxes, and potentially healthcare and other insurance issues.

While your compliance issues increase, you can typically hire employees for less than it costs to hire contractors. In addition, you have greater control over their time and can place greater demands on their compliance with certain company policy issues.

But, for inconsistent or project-based work, an employee may not be the wisest choice.

Contractors offer the flexibility of hiring them for a specific project and paying them only for the time they work on a project. When the project is completed, you can more easily end the contract until they are needed again.

You typically pay a premium for the talent, but if they are working on billable projects, it is simpler to set their hourly rate, determine your markup, establish your fees, and recognize a profit.

For instance, if you pay a contractor $50/hr., you can bill them out at $100/hr. The result is a $50/hr. profit on their time.

Of course, you do need to factor in things like whether they are working in your office, on your equipment, and other factors that add to the costs. Most of these additional costs are hard to attribute to a specific contractor but you should be aware of them. They are part of your cost for doing business.

Finding Talent

If you spend any time reading business or tech news, you are aware of a purported talent shortage. I’ve found this to be true - which is potentially good for your consulting business but presents an actual challenge.

To respond quickly to client needs and new projects, you need to quickly find and identify talent. There are a number of ways to do this.

Craigslist

Scary right? I list Craigslist first because of its prevalence as a source for finding talent. Unfortunately, because of its popularity as a free portal, weeding through responses to job offers can be time-consuming. You typically must find your way through a great deal of unsophisticated and talent-challenged responses.

The truth is, however, I’ve found some great contractors through Craigslist, so do not neglect this source.

Online Tech Communities

Two that come to mind immediately are Spiceworks and Tek-Tips. Both are a great source for answers to technical questions but also have an active base of job-seekers and contractors.

You may also look at technical communities specific to the technology needed on your project. For instance, when I needed a PHP developer who was an expert at WordPress’ blogging and content management system, I turned to the WordPress online community.

Social Media

I’ve used both LinkedIn and Facebook to find talent, typically through both direct connections and with groups specific to the technologies I needed for a project.

Direct Connections/Network

I speak on the topic of networking a lot. One truth about networking is that we often know directly, or know through others, many more people than we realize. I maintain a list of key professional contacts - not just technologists - who I stay in touch with and reach out to when I need someone for a project. Often, I receive referrals or others to contact from my nontechnical contacts.

The benefit of these contacts is that they are referred theoretically by someone you know. This increases the chances of it being a quality referral. People typically do not want to recommend people they do not trust or feel are problematic.

Headhunters, Placement Agencies, and Other Consulting Companies

When you are really hard-pressed to find talent, you might need to reach out to other consulting companies or placement firms. They typically have an available database of talent.

The downside is that you will take a hit on the rate you pay for that talent. The more layers you add into the fee and markup equation, the more challenging making a profit becomes.

Do They Work for Your Company?

When I address this question, I mean more in their presentation to the client. Is your client aware that you’ve brought in a contractor for this project or do you portray the contractor as an employee?

In most cases, I prefer to provide my contractors with an email address and business cards - directly associating them with my company. I inform them that, as far as the client is concerned, they are a representative of my firm.

I do this for branding purposes but also for the benefit of the contractor. I want them to feel they are a part of my team. I believe it produces greater loyalty and allows them to engage the client better on my behalf.

As part of how I work with contractors, I explain the culture and language I want the client to see. For my company, it is Concept over Process - a detailed project development and business-centric mindset and methodology. I want my contractors to look and sound as much like me as possible.

Communications

I am very upfront with contractors and with clients. I want the same from both.

I also tend to manage with a focus on what success looks like for my client and less on the particular steps to get there. I always say, “The goal is fixed but there is leeway in the method.”

I want contractors to provide a short, results-focused report - one to three sentences long - at the end of the day. If more detail is needed, we can revisit the issue. My goal is for my contractors to feel empowered to make decisions and it is important to me that they do so.

If I have to spend too much time managing their activity and on moving a project forward, I won’t use them any longer.

To facilitate client information and notes, I use Google Drive. It allows me to have shared files, to have private technical notes, and to share information with my clients as well.

Tracking Time

Tracking time is essential for effective billing. For years I maintained a local SQL Server/Access DB. Now I set up a Google sheet for each contractor/consultant. These sheets are uniform, and I ask the contractors to add their time daily into their sheet.

Weekly I copy from these sheets into a master sheet. This information is then imported into QuickBooks via an application I wrote using the QuickBooks SDK.

This system is more time-intensive than I’d like, but I recently created a web-based time tracking system that integrates with QuickBooks for a client of mine. I plan to modify that project to allow me to track time for myself and other contractors via the web and have that time flow directly into my QuickBooks billing.

I’ll write more about that when I have it working.

Conclusion

I’ve been using contractors in some capacity for 17 years. One question I was asked at a recent technology meeting was how I protect myself against contractors stealing clients.

I know that such things happen and you should consult an attorney to ensure your contracts protect against this type of action. You can also ensure your clients do not hire your contractors directly without paying you.

However, in 17 years, this has never come up as an issue for me. There are likely two reasons for this. One, my clients like working with me. They like my advice and the way I think. They like the solutions I come up with. They have no interest in breaking that relationship.

The other reason is that I am fairly careful about the type of people I work with. Whether client or contractor, if they make me nervous or make me feel they cannot be trusted, I don’t work with them. I would rather not have to worry about whether I’ve done enough due diligence to protect myself when working with a client or a subcontractor.

If you have questions, challenges, or ideas on how to find and work with contractors, comment below the article or send me an email. I’d be happy to answer your questions.